Thursday April 25, 2013

PavREIT Q1 results in line, says Maybank IB

KUALA LUMPUR: Maybank Investment Bank maintained a “Hold” on Pavilion Real Estate Investment Trust (REIT), in line with its first quarter results.

In a report on Thursday, it said the company's first quarter 2013 net profit of RM54.3mil was within Maybank's and consensus expectations.

“We maintain our financial year 2013 to 2015 earnings forecasts and discounted cash flow-based target price of MYR1.63. The REIT has risen 14% in price since Jan 2013, outperforming the KLCI's 2% rise,” it said.

It said PavREIT is currently trading at an financial year 2014 gross yield of 4.8% vs the large-cap REIT average of 5.0%. with total return of less than 10%.

“Financial year 2013 will be an exciting year for PavREIT as 71% of its net leasable area is due for renewal (mostly in third quarter 2013). Thus far, it has managed to renew 10% of the expiring leases at double-digit rental growth rates,” it said.

It said its retention is high at 96%, and its tenant base has risen to more than 500, with new boutiques such as Miu Miu and Fendi.

“We have assumed rental growth rate of 13% for 2013 and 10% (2014). Fashion Avenue was introduced in Sep 2012. The former Tangs department store was closed for space reconfiguration works at end-Mar 2012 and reopened in Sep 2012. The exercise has resulted in a more than twofold jump in rental per square feet, showcasing management's ability to enhance the value of its properties,” it said.

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